An internet-of-things connectivity startup called Helium has both buzzwords and boldface names going for it. But the business model behind its vision of long-range, low-power, peer-to-peer networking still needs one ingredient: a way to put dollars into the bank accounts of the people building this system.
The idea behind Helium is to provide a trickle of bandwidth to IoT devices that may not be anywhere near a power outlet—and to do so securely, without relying on proprietary technology, and at a cost almost too cheap to meter.
“Those are things that aren’t possible today,” says chief operating officer Frank Mong. The San Francisco firm—cofounded in 2013 by Napster creator Shawn Fanning, with funding from such high-profile venture capital firms as Union Square Ventures—sees its only path in a peer-to-peer architecture.
Helium has no aspirations of building out a network like AT&T,” Mong says. “We cannot do it as a single, centralized entity.”
Last week, the company announced that its decentralized network of 1,200-plus hotspots placed in people’s homes and offices had reached more than 425 cities spanning 45 of 50 states across the U.S., with a software development kit now available.
“We’ve seen it as far as 25 miles away,” Mong says of LongFi range, although the company’s site suggests 10-plus miles is more realistic. That’s allowed such early markets as Austin and San Francisco to get close to complete coverage, while Manhattan will need another 150 or so hotspots on top of the 100-plus already online there.
That range can set LongFi apart from 5G’s exceedingly limited coverage so far, while the decentralized buildout could allow the network to grow faster than such centralized, IoT-specific efforts as Sigfox.
(Technically, consumers who plug a LongFi hotspot into their network may be violating their terms of service: Most consumer internet providers ban resale of the connectivity they provide; Mong professes himself unafraid of protests from ISPs, saying any would be “a sign of success.”)
Data transfers over Helium are too slow for multimedia. But the company sees an opportunity in monomedia: connected-gadget data such as location, temperature, and pressure that require only a few bytes to transmit.
Helium isn’t charging for access yet, nor is it providing any quality-of-service guarantees either. But eventually, customers will pay with data credits.
The lure of cryptocurrency
So why would someone spend $495 on a hotspot that helps Helium build out its network? That’s where the company’s blockchain infrastructure comes in. Each hotspot, uniquely identified with an auto-generated three-word phrase ending in an animal name (for instance, “Short Arctic Tuna”), will mine the company’s Helium Network Token (HNT) cryptocurrency as part of the computational process verifying the peer-to-peer network’s integrity and reliability.
Mong says Helium opted for this approach to optimize for energy efficiency—”we couldn’t use bitcoin, because it’s too resource intense”—and allow the hotspots to draw only five watts of electricity. The idea is that customers using Helium’s networks to transfer data will buy credits in HNT instead of U.S. dollars—by buying Helium’s tokens from the owners of its hotspots. The catch is that the exchanges to allow those transactions happen don’t exist yet, and Helium can’t set one up or even ask other parties to create one.
Instead, it has to hope that market forces drive an existing exchange to begin accepting HNT, or that somebody will create a new exchange for that purpose.
“We hope it happens,” Mong says. But he adds that because of security laws, “Helium cannot be involved in soliciting exchanges to do that.”
IDC research director for blockchain strategies James Wester says he’s looked at Helium and thinks the concept can work. “It’s like franchising connectivity with cryptocurrency providing the mechanism for value exchange between those consuming that connectivity and those providing it,” he writes in email. “I buy a hotspot—a local franchise—and Helium provides the advertising, brand, back-end, etc.”
But, Wester adds, he remains unclear about the long-term financial upside of buying a Helium hotspot. “I’m not sure what the value of that Helium token really is over time,” he says. “If I buy that hotspot with the intention of it turning into an investment that I can recoup over time, knowing that value over time is important.”
Mong allows that there is some uncertainty for those early buyers: “It is a leap of faith, for sure.”
Correction: A previous version of this story said that Helium was working with Lime to track the latter company’s scooters. Lime has denied this relationship.